Investor Presentaiton
F. Definitions & Explanations (continued)
Net Interest Margin
Net loans and
advances to
customers
Net loans to deposits
ratio
Net performing loan
book
Net Stable Funding
Ratio (NSFR)
Net zero emissions
New lending
Non-interest income
Non-performing
exposures (NPEs)
Net interest margin is calculated as the net interest income (annualised) divided by the
'quarterly average interest earning assets' (as defined).
Net loans and advances to customers comprise gross loans (as defined) net of allowance for
expected loan credit losses (as defined, but excluding allowance for expected credit losses on
off-balance sheet exposures disclosed on the balance sheet within other liabilities).
Net loans to deposits ratio is calculated as gross loans (as defined) net of allowance for
expected loan credit losses (as defined) divided by customer deposits.
Net performing loan book is the total net loans and advances to customers (as defined)
excluding the legacy exposures (as defined).
The NSFR is calculated as the amount of "available stable funding" (ASF) relative to the
amount of "required stable funding" (RSF). The regulatory limit, enforced in June 2021, has
been set at 100% as per the CRR II.
The reduction of greenhouse gas emissions to net zero through a combination of reduction
activities and offsetting investments
New lending includes the disbursed amounts of the new and existing non-revolving facilities
(excluding forborne or re-negotiated accounts) as well as the average year-to-date change (if
positive) of the current accounts and overdraft facilities between the balance at the beginning
of the period and the end of the period. Recoveries are excluded from this calculation since
their overdraft movement relates mostly to accrued interest and not to new lending.
Non-interest income comprises Net fee and commission income, Net foreign exchange
gains/(losses) and net gains/(losses) on financial instruments and (excluding net gains on
loans and advances to customers at FVPL), Insurance income net of claims and commissions,
Net gains/(losses) from revaluation and disposal of investment properties and on disposal of
stock of properties, and Other income.
As per the European Banking Authorities (EBA) standards and European Central Bank's (ECB)
Guidance to Banks on Non-Performing Loans (which was published in March 2017), non-
performing exposures (NPEs) are defined as those exposures that satisfy one of the following
conditions:
(i) The borrower is assessed as unlikely to pay its credit obligations in full without the
realisation of the collateral, regardless of the existence of any past due amount or of
the number of days past due.
(ii) Defaulted or impaired exposures as per the approach provided in the Capital
Requirement Regulation (CRR), which would also trigger a default under specific
credit adjustment, diminished financial obligation and obligor bankruptcy.
(iii) Material exposures as set by the CBC, which are more than 90 days past due.
(iv) Performing forborne exposures under probation for which additional forbearance
measures are extended.
(v) Performing forborne exposures previously classified as NPEs that present more than
30 days past due within the probation period.
From 1 January 2021 two regulatory guidelines came into force that affect NPE classification
and Days-Past-Due calculation. More specifically, these are the RTS on the Materiality
Threshold of Credit Obligations Past-Due (EBA/RTS/2016/06), and the Guideline on the
Application of the Definition of Default under article 178 (EBA/RTS/2016/07).
The Days-Past-Due (DPD) counter begins counting DPD as soon as the arrears or excesses
of an exposure reach the materiality threshold (rather than as of the first day of presenting any
amount of arrears or excesses). Similarly, the counter will be set to zero when the arrears or
excesses drop below the materiality threshold. Payments towards the exposure that do not
reduce the arrears/excesses below the materiality threshold, will not impact the counter.
For retail debtors, when a specific part of the exposures of a customer that fulfils the NPE
criteria set out above is greater than 20% of the gross carrying amount of all on balance sheet
exposures of that customer, then the total customer exposure is classified as non-performing;
otherwise only the specific part of the exposure is classified as non-performing. For non-retail
debtors, when an exposure fulfils the NPE criteria set out above, then the total customer
exposure is classified as non-performing.
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